TCRLA_Public/020610.mbx        T R O U B L E D   C O M P A N Y   R E P O R T E R

                   L A T I N   A M E R I C A

           Monday, June 10, 2002, Vol. 3, Issue 113



BANCO GALICIA: Shareholders Appoint New Board Members
CLAXSON INTERACTIVE: 1Q02 Results Down on Peso Devaluation
REPSOL YPF: Growing Risk At Unit Continues To Threaten Position
TELECOM ARGENTINA: Peso Devaluation Brings Disappointing Results


FOSTER WHEELER: Ratings on Watch Negative Pending Follow Through
GLOBAL CROSSING: Scrambles For Clients Of Failed Rival
TYCO INTERNATIONAL: Johnson & Perkinson Files Class Action Suit
TYCO INTERNATIONAL: Former CEO Pleads Innocent To Allegations
TYCO INTERNATIONAL: Board Grapples With Ex-CEO's Severance Deal


COPEL: BBVA Ups Recommendation, Raises Target Price On ADRs
ELETROPAULO METROPOLITANA: Shares Plunge On Moody's Review
EMBRAER: Chinese Joint Venture Deal Confirmed
VARIG: Develpes Strategic Partnership With Gripen


AES CORP: S&P Lowers Ratings; Off CreditWatch; Outlook Negative
AES CORP: Defends Liquidity in Response to S&P Downgrade


MERCANTILE INTERNATIONAL: Shareholders Approve Restructuring
PAZ DEL RIO: Future Lies In New Government's Hands
TELECOM: To Pay Nortel COP149.8 Billion In Damages
TELECOM: Continued Strike May Lead To Liquidation
TERRA COLOMBIA: Exec. Denies Rumors Of Financial Trouble

E L   S A L V A D O R

AES CORP: Subsidiaries Feel The Sting of S&P's Parent Downgrade


AHMSA: Announces Exemption From U.S. Tariff
GRUPO MEXICO: Threatens To Close Plants On Union's Inflexibility
GRUPO TFM: Finds Adequate Interest In $180M 10-Yr Bonds

     - - - - - - - - - -


BANCO GALICIA: Shareholders Appoint New Board Members
Banco de Galicia y Buenos Aires SA, Argentina's largest private
commercial bank, announced Thursday its sharholders named a new
board of directors, Dow Jones Newswires reports.

The new board members include Eduardo Arrobas, Daniel Llambias
and Antonio Garces. Appointees to the board include Juan Martin
Etchegoyhen, Federico Miguel Caparros Bosch and Jorge Grouman.
The new board will also include alternate board members Luis
Maria Ribaya, Guillermo Laje, Juan Carlos Fossatti, Mariano Grada
Olaciregui and Sergio Grinenco.

A Friday meeting was scheduled to appoint a new president to
replace Eduardo Escasany, who announced his departure from the
bank earlier this year. According to a Clarin newspaper report
released Thursday, Garces is to be named the new president of the
institution. The newspaper also reported that the first order of
business for Galicia after naming a new president would be to
find a foreign bank to take an equity stake.

Banco Galicia recently filed to sell US$1 billion in new 7.875%
bonds to help restructure debts maturing in August and beyond.
The bank is also seeking US$300 million in fresh capital through
a swap of its debts with international creditors for an equity
stake in the company.


Tte. Gral Juan D. Peron 407
1038 Buenos Aires, Argentina
Phone: +54-11-6329-0000
Fax: +54-11-6329-6100
Home Page:
Eduardo J. Escasany,  Chairman and Chief Executive Officer
Sergio Grinenco, Chief Financial Officer

Corporate Communications
Phone: (54 11) 6329 6439
Fax:(54 11) 6329 6000 ext.: 2041

Representative Office:
Buenos Aires
Reconquista 144, piso 17
(1003) Buenos Aires, Argentina
Phone: (54-11) 4343-5200/5303/5162
Fax: (54-11) 4343-6576

New York Branch
300 Park Avenue, 20th Floor
New York, NY 10022
Phone: (1-212) 906-3700
Fax: (1-212) 906-3777

CLAXSON INTERACTIVE: 1Q02 Results Down on Peso Devaluation
Claxson Interactive Group, Inc., a multimedia provider of branded
entertainment content to Spanish and Portuguese speakers around
the world, reported its financial results for the three months
ended March 31, 2002.

Net revenues for the three months ended March 31, 2002 totaled
$20.1 million, a 30% decrease from pro forma net revenues of
$28.6 million for the first quarter of 2001, due primarily to the
decrease in dollar terms of Argentinean revenues reflecting a 52%
devaluation of the Argentine currency during the first quarter of
2002, the downturn of the Argentine advertising market and the
restructuring of the Internet operations.

Claxson has experienced operating losses and negative cash flows,
which have also been negatively affected by the devaluation and
economic situation in Argentina where Claxson has significant
operations. In an effort to improve its financial position,
Claxson is taking certain steps including the disposition of non-
strategic assets and the restructuring of some of its
subsidiaries' debt including renegotiation of applicable
covenants. Claxson believes that if these steps are not
successfully completed in a timely manner, it is likely that its
auditors will express a "going concern" opinion in connection
with Claxson's annual report on Form 20-F to be filed with the
Securities and Exchange Commission in June 2002.

"From an operational standpoint, Claxson has made a significant
improvement by reducing this quarter's operating expenses to less
than half the amount of the prior year period and its operating
loss to one ninth of what it was last year," said Roberto Vivo,
Chairman and CEO. "Our earnings before depreciation, amortization
and merger restructuring expenses have in one year made a
complete turnaround from negative to positive, primarily due to
the downsizing of our Internet and broadband division and our
continued efforts to rationalize our operations throughout the
entire company."

Claxson was formed on September 21, 2001 in a merger transaction
which combined El Sitio, Inc., media assets contributed by Ibero-
American Media Partners II, Ltd. (IAMP), and other media assets
contributed by members of the Cisneros Group of Companies. Pro
forma combined financial results for the three months ended March
31, 2001 are presented as if the merger transaction had been
effected on January 1, 2001. Consolidated financial results for
the three months ended March 31, 2002 and 2001 are also provided.
Historical information for IAMP, El Sitio and the other assets
comprising Claxson is provided in Claxson's registration
statement on Form F-4 as filed with the U.S. Securities and
Exchange Commission, which became effective on August 15, 2001.

In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS 142) which requires an initial
impairment test for goodwill and intangible assets. Claxson is
currently evaluating its goodwill to determine if any impairment
charge will result from the adoption of this statement.
Amortization expense for the three months ended March 31, 2001
was $2.5 million. Accordingly, reported net loss as of March 31,
2001 would have been $3.7 million (per share loss of $0.20) if
SFAS 142 had been adopted as of January 1, 2001.

Claxson's pro forma combined results reflect the aggregate
performance of its business lines: pay television; broadcast
radio and television; and Internet and broadband. Business line
performance highlights are provided as a supplement to this press
release. Claxson also holds an 80.1% equity interest in Playboy
TV International (PTVI), a joint venture with Playboy
Enterprises, Inc. (NYSE: PLA). Claxson does not control PTVI and
therefore its interest in PTVI is not consolidated for reporting

On May 17, 2002, Claxson announced that it had sold its 50%
participation in the animation channel Locomotion, a joint
venture between Claxson and The Hearst Corporation, to Canada-
based Corus Entertainment Inc. (NYSE: CJR). During the second
quarter of 2002, Claxson will record a gain of approximately $6.5
million arising from this transaction. Claxson will continue to
provide certain key services to the channel including affiliate
sales support in Latin America, program origination and post-
production services, among others.

Subscriber-based fees for the three-month period ended March 31,
2002 totaled $9.7 million, which comprised approximately 48% of
total net revenues and represented a 38% decrease from pro forma
subscriber-based fees of $15.6 million for the first quarter of
2001. The decrease is primarily attributed to the impact of the
devaluation of the Argentine currency of $4.5 million due to the
mandatory conversion of all sales contracts to local currency
dictated by the Argentine government. Claxson's basic package of
owned and represented channels reached a total of approximately
56 million aggregate subscribers as of March 31, 2002 which
represents a 26% increase compared to 44.4 million on March 31,

Advertising revenues for the three-month period ended March 31,
2002 were $7.3 million, which comprised approximately 36% of
Claxson's total net revenues and represented a 33% decrease from
pro forma advertising revenues of $10.9 million for the first
quarter of 2001. This decrease in advertising revenues in the
first quarter of 2002 was due primarily to a decrease in Internet
advertising revenues of $1.6 million, and a decrease in pay
television advertising of $1.0 million as a result of the
economic situation in Argentina.

Operating expenses for the three months ended March 31, 2002 were
$22.2 million, decreasing 53% from pro forma operating expenses
of $47.3 million for the first quarter of 2001, due primarily to
the downsizing of our Internet and broadband division of $13.3
million, management's continued efforts to rationalize the
operations and the effect of the Argentine devaluation on the
expenses of our Argentine-based subsidiaries. In addition,
operating expenses for the three months ended March 31, 2002
reflect severance costs of $0.7 million resulting from other
post-merger restructuring and integration initiatives, down from
pro forma merger expenses and severance costs of $2.4 million for
the three months ended March 31, 2002. As a result, in spite of
the decrease in net revenues, the operating loss was reduced to
$2.1 million for the three months ended March 31, 2002 compared
to a pro forma operating loss of $18.8 million for the first
quarter of 2001.

Net loss for the three months ended March 31, 2002 was $55.4
million ($2.99 per common share), which includes a charge of
$46.8 million due primarily to a foreign exchange loss on certain
U.S. dollar denominated debt held by Claxson's Argentine
subsidiary as a result of the Argentine currency devaluation. Pro
forma net loss for the three months ended March 31, 2001 was
$31.9 million, or $1.72 per common share. Subsequent to March 31,
2002, the Argentine currency has continued to devalue resulting
in further exchange rate losses.

As of March 31, 2002, Claxson had a balance of cash and cash
equivalents of $11.1 million and $115.5 million in debt. On April
30, 2002, Imagen Satelital S.A., an Argentina-based Claxson
subsidiary, announced that it will not make an interest payment
of US $4.4 million on its 11% Senior Notes due 2005. Banc of
America LLC, an investment banking firm, has been engaged to
provide financial advice and to assist the company in evaluating
restructuring alternatives.

Playboy TV International

For the three months ended March 31, 2002, Playboy TV
International (PTVI) and its affiliated companies recorded
combined net revenue of $10.4 million, unchanged from net revenue
of $10.5 million for the first quarter of 2001. PTVI currently
distributes Playboy TV, Spice and/or its other branded networks
in 53 countries and 14 languages worldwide. PTVI has incurred net
losses and working capital deficiencies. Unless PTVI's financial
obligations can be restructured, PTVI will remain primarily
dependent on capital contributions from Claxson to fund
shortfalls. Claxson is in the process of taking certain steps to
restructure its capital structure, however, this steps were not
completed prior to the release of PTVI's annual financial
statements. As a result, PTVI's auditors have expressed a going
concern opinion on PTVI's financial statements for the year ended
December 31, 2001.

Nasdaq Update

On February 14, 2002, Claxson received notification from Nasdaq
that its common shares had failed to maintain a minimum market
value of publicly held shares (MVPHS) of $5.0 million for 30
consecutive trading days as required by Nasdaq rules. As a
result, Claxson has filed an application to list its securities
in The Nasdaq SmallCap Market.

About Claxson

Claxson is a multimedia company providing branded entertainment
content targeted to Spanish and Portuguese speakers around the
world. The company has a portfolio of popular entertainment
brands that are distributed over multiple platforms through
Claxson's assets in pay television, broadcast television, radio
and the Internet. Claxson was formed through the merger of El
Sitio and assets contributed by members of the Cisneros Group of
Companies and funds affiliated with Hicks, Muse, Tate & Furst
Inc. Headquartered in Buenos Aires, Argentina, and Miami Beach,
Florida, Claxson has a presence in all key Ibero-American
countries and in the United States.

To see Financial Statement:

          Jose Antonio Ituarte, Chief Financial Officer
          Phone: 011-5411-4339-3700

REPSOL YPF: Growing Risk At Unit Continues To Threaten Position
Repsol's Argentine unit YPF continues to be a growing risk for
the Spanish oil group even if it has turned free cash flow
positive in the first quarter, generating EUR200 million by
cutting capital spending and working capital, the Financial Times

The Spanish group's investment grade ratings are under pressure
due to cross-default clauses on bonds, as well as the threat of
nationalization in Argentina.

While there is no serious talk of nationalization yet, the
Argentine authorities are increasingly meddling in the oil
companies' business. In YPF's case, 70 per cent of its export
revenues can be kept in dollars, but they still cannot be
considered secure. These cash flows help underpin YPF's liquidity
position in 2002. Any pressure to convert them into pesos would
put the onus on the parent company to increase its financial

The latent threat from Argentina, and Repsol's sale of a 23 per
cent stake in Gas Natural, have focused attention on the
prospective financial position of the parent company were it
shorn of YPF and Gas Natural. Net debt, according to estimates by
JP Morgan Chase analysts, would drop from US$16.8 billion
currently to US$11.3 billion, with earnings before interest, tax,
depreciation and amortization (EBITDA) cut from US$7.8 billion to
US$2.6 billion. But that would leave a company focused mainly on
refining, with net interest cover of 2.7 times EBITDA, compared
with 5.4 times currently. Repsol could sell more assets, it has
access to Euro 4 billion of bank lines - providing the Argentine
situation did not trigger Material Adverse Change clauses -
and it has BBVA and La Caixa as shareholders, with an interest in
preventing default. That may reassure bondholders. But
shareholders would own the short end of a company without
dividends valued at more than 10 times ebitda.

          Paseo de la Castellana 278
          28046 Madrid, Spain
          Phone   +34 91 348 81 00
          Home Page:
          Av. Roque S enz Pe a, 777.
          C.P 1364. Buenos Aires
          Alfonso Cortina De Alcocer, Chairman
          Ramon Blanco Balin, Vice Chairman
          Carmelo De Las Morenas Lopez, CFO

TELECOM ARGENTINA: Peso Devaluation Brings Disappointing Results
Telecom Argentina Stet-France Telecom SA posted a net loss of
ARS2.3 billion (US$1=ARS3.67) in the first-quarter of this year
versus net income of ARS31 million for the same period a year
ago, reports Bloomberg.

In a statement issued late Thursday, Telecom Argentina, the
country's second-largest phone company, blamed a four-year
economic contraction and the government's refusal to allow
utility companies to pass on dollar-denominated costs after a
devaluation of the peso as one of the main reasons for the loss.

In addition, the opening of Argentina's phone market to
competition cut into Telecom Argentina's mainstay basic and long-
distance phone business and slowed growth in its more profitable
cellular phone and Internet businesses.

Revenue during the period fell 10 percent to ARS701 million from
ARS776 million in the same quarter a year earlier.

Telecom Argentina, which is 60 percent owned by Telecom Italia
SpA and France Telecom SA, defaulted on US$3.2 billion debt in
April. The default underscored the difficulties facing companies
in Argentina and the unwillingness of foreign owners to bail out
their local units after the government defaulted on a US$95-
billion debt and devalued the currency.

In January, Argentina unhinged the peso from its 11-year parity
with the dollar and subsequently allowed the currency to float.
By the end of the first quarter the peso had lost around 70% of
its value against the dollar.

          Alicia Moreau de Justo 50, 10th Floor
          Capital Federal (1107) Repoblica Argentina
          Phone: +54 11 4968 4000
          Home Page:
          Alberto J. Ricciardi, Chief Financial Officer
          Elvira Lazzati, Finance Director
          Pedro Insussarry, Investor Relations Manager
          Phone: (5411) 4968-3626/3627
          Fax: (5411) 4313-5842/3109


FOSTER WHEELER: Ratings on Watch Negative Pending Follow Through
Standard & Poor's said Thursday that its single-'B'-plus
corporate credit rating on Foster Wheeler Ltd., a leading
engineering and construction firm, remains on CreditWatch with
negative implications following the company's announcement that
it has signed a term sheet with its senior bank lending group for
a $289.9 million bank credit facility.

The bank facility will mature in 2005, and consists of a
revolving credit, term loan, and letter of credit facility.

"The rating will remain on CreditWatch until the bank, lease, and
account receivable facility negotiations are completed, and the
company's financial flexibility assessed," said Standard & Poor's
analyst Joel Levington. Additionally, Standard & Poor's will
review what, if any, erosion has taken place with the firm's
business position during this time of financial stress. Finally,
Standard & Poor's will review the collateral package granted to
the senior bank lenders (a first priority lien on Foster
Wheeler's domestic assets) to determine if the bank facility and
the senior unsecured notes will be notched relative to the
corporate credit rating.

         Media Contact:
         Alastair Davie, 908/730-4444
         Shareholder Contact:
         John Doyle, 908/730-4270
         Other Inquiries: 908/730-4000
         Web site at

GLOBAL CROSSING: Scrambles For Clients Of Failed Rival
Global Crossing Ltd., a telecommunications network operator
trying to emerge from bankruptcy, is now attempting to take
advantage of its rival KPNQwest NV's recent financial downfall.

According to a Bloomberg report, Global Crossing is courting
KPNQwest NV clients following its insolvency filing last week.
The filing cam after the Company failed to sell assets to cover
pressing financial commitments.

Global Crossing may benefit as KPNQwest's customers look for
other companies to transmit Internet data and telephone calls

"There's a lot of scrambling going on" among customers of
companies including KPNQwest, said John Longo, Global Crossing
vice president of data services, in an interview. "We've been
focusing on (clients) of companies that are shutting down."

Global Crossing, according to Longo, is also taking aim at
clients of Teleglobe Inc., which sought protection from creditors
last month after piling up US$3.1 billion in losses since 2000
and parent BCE Inc. pulled funding.

Based in Hamilton, Bermuda, and run from offices in Madison, New
Jersey, Global Crossing filed for Chapter 11 in January, listing
US$12.4 billion in debts. The Securities and Exchange Commission,
the U.S. Attorney's Office in Los Angeles and a committee of its
own board are examining allegations that the Company inflated
revenue from sales of capacity on its 27-nation
telecommunications network.

          Press Contacts
          Cynthia Artin
          +1 973-410-8820

          Becky Yeamans
          + 1 973-410-5857

          Tisha Kresler
          + 1 973-410-8666

          Kevin Burgoyne
          Latin America
          + 1 305-808-5947

          Mish Desmidt
          +44 (0) 7771-668438

          Ken Simril
          + 1 310-385-3838

TYCO INTERNATIONAL: Johnson & Perkinson Files Class Action Suit
Johnson & Perkinson ("J&P") filed a class action lawsuit in the
U.S. District Court for New Hampshire on behalf of purchasers of
TYCO International Ltd.("TYCO") (NYSE: TYCO) common stock and
call options and sellers of TYCO put options during the period
from May 15, 2002 through June 3, 2002.

The complaint asserts claims against TYCO and its former CEO,
Dennis Kozlowski, for violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. Plaintiffs allege that Defendants issued various
affirmative statements regarding the Company's ability to conduct
an offering of stock for its subsidiary CIT Group which were
false and misleading given Defendants' failure to disclose the
material adverse risk that they would not be able to complete
this offering, or, if they did, would not be able to do so on
favorable terms, once the criminal investigation of Kozlowski
became publicly known. As a result, TYCO's common stock was
artificially inflated throughout the Class Period, causing
plaintiff and other members of the Class to purchase or sell such
securities at prices skewed by Defendants' conduct.

Purchasers of TYCO common stock or call options, or sellers of
TYCO put options, during the period from May 15, 2002 through
June 3, 2002, inclusive, are encouraged to protect their rights.
No later than sixty days from today's date, motions must be filed
to be appointed as Lead Plaintiff. A Lead Plaintiff is a
representative party that acts on behalf of other class members
in directing the litigation. The Private Securities Litigation
Reform Act of 1995 directs Courts to assume that the class
member(s) with the "largest financial interest" in the outcome of
the case will best serve the class in this capacity. Courts have
discretion in determining which class member(s) have the "largest
financial interest," and have appointed Lead Plaintiffs with
substantial losses in both absolute terms and as a percentage of
their net worth. Those who have sustained substantial losses in
these securities during the Class Period are directed to contact
Johnson & Perkinson for a more thorough explanation of the Lead
Plaintiff selection process.

Attorneys Johnson and Perkinson are both former employees of the
Securities and Exchange Commission ("SEC"). In particular, Mr.
Johnson was an attorney with the enforcement division of the SEC
from 1980-1985 and since that time, has primarily prosecuted
complex class actions on behalf of plaintiffs in the areas of
securities and consumer fraud. Based in South Burlington,
Vermont, the firm has prosecuted leading actions on behalf of
defrauded investors in numerous public companies resulting in the
recovery of many millions of dollars and has been singled out for
its excellence by various courts. The firm is currently one of
the lead counsel, or sole lead counsel, in securities class
actions pending against Xerox, Priceline, Nortel and Exchange

          1690 Williston Road
          South Burlington, Vermont 05403
          Toll free: 1-888-459-7855
          Dennis J. Johnson, Esquire
          Jacob B. Perkinson, Esquire

TYCO INTERNATIONAL: Former CEO Pleads Innocent To Allegations
Former Tyco International, Ltd. chief executive, Dennis
Kozlowski, has pleaded innocent to charges of avoiding more than
US$1 million in sales tax for high-priced paintings he displayed
in his posh apartment overlooking Central Park, says AP.

Kozlowski's lawyer, Stephen Kaufman, called the charges

The executive surrendered to authorities Tuesday, just a day
after resigning as CEO of the troubled manufacturing company,
which makes everything from coat hangers to underwater fiber-
optic cable.

He was released on US$3 million bond and instructed not to leave
the country without written permission from the court.

Tyco officials said the Company continues to cooperate with
Manhattan District Attorney Robert M. Morgenthau and is forging
ahead with its own investigation of Kozlowski's alleged actions.

To see Tyco's latest financial statements:

          Media Relations:
          J. Brad McGee or Peter Ferris

          Investor Relations:
          R. Jackson Blackstock
          Home Page:

TYCO INTERNATIONAL: Board Grapples With Ex-CEO's Severance Deal
Just days after it secured the resignation of former chairman and
chief executive L. Dennis Kozlowski, the Company's board of
directors now faces an even thornier problem: Should it pay
Tyco's leader for the past decade any money for going away

According to a report by Knight-Ridder Business News, executive
compensation specialists and corporate ethics consultants said
that the directors are torn between honoring a commitment to the
former chief executive and risking further damage to the
Company's tattered reputation.

"This is going to be very problematic for the board," said
Charles Elson, director of the Center for Corporate Governance at
the University of Delaware.

"I don't think investors would be very enthusiastic about a
reward for past services, given where Tyco is now. Offering a
severance payment in today's climate, especially where the stock
has gone, would risk a negative shareholder response," Elson

Tyco officials have reiterated their position that Kozlowski had
voluntarily resigned from the firm for "personal reasons,"
thereby nullifying any company obligation to make a severance
payment under Kozlowski's employment contract. However, the
Company will negotiate with the former executive.

"The board has committed to enter into good-faith discussions
with Dennis on the subject of a severance," said J. Brad McGee, a
Tyco executive vice president. "What that may or may not include,
I don't have any details on." McGee said the settlement would be
made "as soon as practical," but declined to comment on what
factors the board will consider in calculating a payment for
Kozlowski. "It's a difficult issue and one we'll work through,
but not one in which we're in a position to make any public

Meanwhile, others argue that despite Tyco's decline of the past
six months, Kozlowski deserves to be rewarded for nearly 10 years
of exemplary leadership. Robert Kennedy, associate professor of
business administration at Harvard Business School, argues that
from the time Kozlowski took the helm in July 1992 through last
Friday, Tyco's shares with dividends reinvested appreciated 376
percent. Over the same period, the S&P 500 index grew 167

"He really did transform the Company and you want to recognize
that," said Kennedy. "And the fact he resigned and they avoided a
messy boardroom battle also saved the Company a lot of turmoil."
If the board persuaded Kozlowski to resign, they relieved
themselves of the obligation to honor an extraordinarily
protective contract.

According to public filings, Kozlowski could only be terminated
for cause if he was convicted of a felony. Moreover, the Company
would have to show that the conviction was "materially and
demonstrably injurious to the Company." Finally, the board would
have to adopt a resolution supported by at least three-quarters
of its members to remove Kozlowski.


COPEL: BBVA Ups Recommendation, Raises Target Price On ADRs
Spanish brokerage house BBVA Securities said it has raised its
recommendation on Brazilian electric utility Cia. Paranaense de
Energia (Copel) to `buy' from `outperform,' relates Dow Jones

Moreover, BBVA upped its target price by 4%, to US$8.88 per
American Depositary Receipt. Copel's ADRs, which have slipped
6.2% over the past month, ended Wednesday at US$5.30 on the New
York Stock Exchange.

According to the Spanish brokerage house, the main catalyst for
Copel's short-term prospects is the conversion of BRL700 million
(US$1=BRR2.637) of illiquid credits into cash.

"While privatization prospects over the next four years remain
uncertain, the Company's solid financial condition and limited
exposure to non-Real-denominated assets, as well as expected free
market gains as of 2003, are the primary factors supporting our
positive view of the stock over the medium term," the brokerage
firm said in a report.

Copel, controlled by the Brazilian state of Parana, has BRL1.4
billion in debt, 62 percent of which is denominated in U.S.
dollars. The utility serves about three million customers in
Parana, with an installed capacity of 4,580 megawatts, making it
one of Brazil's largest utilities.

CONTACTS:  Ingo Henrique Hobert, Chief Executive Officer
           Deni Lineu Schwartz, Chief Government Relatins Officer
           Ferdinando schauenburg, CFO

ELETROPAULO METROPOLITANA: Shares Plunge On Moody's Review
Shares of Eletropaulo Metropolitana SA plummeted 12 percent to
BRL41.50 Thursday after Moody's Investors Service said it might
downgrade the utility's debt on concern about its ability to
refinance US$414 million due by the end of September, says Dow
Jones Newswires.

"The Moody's rumor is adding to an environment that has worsened
for Brazilian corporate debt," said Oswaldo Telles, energy
analyst at BBV Securities in Sao Paulo.

"But investors are overreacting. You would think Eletropaulo is
about to default on its debt, but I don't believe that's the
case," added Telles.

Moody's is reviewing the Baa2 local currency issuer rating of
Eletropaulo, and this could involve a downgrade of several
notches, said an analyst who preferred to remain unnamed.

In addition to Moody's apprehensions, the local currency is
weakening fast amid worry about the health of the government's
debt program, and this isn't helping Eletropaulo, which holds
dollar-linked debt.

The real was 5.3 centavos weaker at BRL2.662, trading at its
weakest level this year.

Eletropaulo Metropolitana, a subsidiary of AES Corp., provides
electricity services in Brazil's Sao Paulo state, serving about
4.5 million people.

         Avenida Alfredo Egidio de Souza Aranha 100-B,
         13 andar 04726-270 San Paulo
         Phone: +55-11-548-9461, +55 11 5696 3595
         Fax: +55-11-546-1933
         Luiz D. Travesso, Chairman and President
         Orestes GonOalves Jr., VP Finance/Investor Relations

EMBRAER: Chinese Joint Venture Deal Confirmed
Mauricio Botelho, president of Empresa Brasileira de Aeronautica
SA (Embraer), confirmed that the Brazilian aircraft manufacturing
giant is joining with a State-owned Chinese aviation company to
build an aircraft assembly and components factory in China.

Embraer will hold a 51% stake in the joint venture with the
State-owned Aviation Industry of China.

"It is a market with an enormous potential and we may begin
building the factory this year," Botelho said.

Earnings of the aircraft manufacturing giant suffered from the
effects of September 11, with first quarter net income down by
19% to BRL176.4 million (US$70 million), or 25 centavos a share,
from BRL218.7 million, or 40 centavos, in the same period a year

Net revenue during the first quarter also fell 13% to BRL1.33
billion from BRL1.52 billion in the same period in 2001.

However, Embraer saw an improvement in its net cash at the end of
the first quarter. At March 31, net cash position was at BRL89.4
million, compared with negative BRL52.9 million at December 31.

Nonetheless, earnings before interest, taxes, depreciation and
amortization, (EBITDA) -- a measure of Embraer's ability to
generate cash -- fell to BRL302 million from BRL465.3 million a
year earlier.

           Press office:
           Phone +55 12 3927 1311
           Fax + 55 12 3927 2411
           Press office mgr. Bob Sharp
           Press officer Wagner Gonzalez

VARIG: Develpes Strategic Partnership With Gripen
Gripen International and VEM-VARIG Engineering and Maintenance
signed a Memorandum of Understanding to evaluate potential
projects in the areas of logistics support and transfer of

The program of industrial cooperation is required under the
Brazilian government's plan to acquire new jet fighter aircraft.

The expansion means VEM will be now be a strategic partner to
Gripen International and as such the center for Gripen
technologies in Brazil.

If Gripen International is now awarded the contract to supply
Gripen fighter aircraft to the Brazilian Air Force, the level of
industrial cooperation proposed will lead to the creation of a
Gripen Systems Development Center in Brazil.

President of VEM-VARIG Engineering and Maintenance, Evandro
Oliveira, said that "this strategic partnership with Gripen
International aims at securing Brazil's autonomy as it is a
Brazilian company." Evandro emphasized, "VEM is taking steps to
be ready to absorb such technology."

Gripen International is a company owned jointly by Saab AB of
Sweden and BAE SYSTEMS of Great Britain.

VEM - VARIG Engineering and Maintenance is a Brazilian company
that provides engineering and heavy maintenance (repair and
overhaul) for aircraft and its components.

CONTACT:  Owe Wagermark
          Communications Director
          Gripen International
          Phone: +46 708 896000

          Evandro Braga de Olivera
          Varig Engineering & Maintenance
          Phone: +55 21 2468 2126

          Celia Santos, Gripen Brazil PR
          Phone: +55 11 30373225
          Home Page:


AES CORP: S&P Lowers Ratings; Off CreditWatch; Outlook Negative
Standard & Poor's lowered its double-'B' corporate credit and
senior unsecured debt ratings on The AES Corp. to double-'B'-
minus, its single-'B'-plus rating on AES' subordinated debt to
single-'B', and its single-'B' rating on the company's trust
preferred securities to single-'B'-minus, and removed all the
ratings from CreditWatch with negative implications. The outlook
is negative.

"The downgrade is due primarily to the increasingly challenging
environment that AES is facing in managing businesses in Latin
America," said credit analyst Scott Taylor. "Specifically,
political instability in Venezuela and Brazil has made
refinancing current obligations more challenging than usual,
which could limit distributions, and a weakening currency in
Venezuela could also weaken dollar-denominated distributions from
that country," Mr. Taylor added.

In addition, Standard & Poor's believes that liquidity
constraints at AES Gener S.A. (triple-'B'-minus/Watch Neg) make
significant distributions from that subsidiary unlikely. While it
is certainly plausible that AES will get cash out of these
businesses and make up some potential shortfalls with upside from
some of the more stable AES businesses providing cash to the
holding company, the increased risk profile in Latin America
given AES' current debt levels results in a profile more in-line
with a double-'B'-minus rating. Standard & Poor's has been
monitoring AES' liquidity, and notes that AES has improved its
liquidity position since the beginning of the year. In addition,
AES is not in the trading business and therefore it has no
trading liabilities and no issues arising from the recent FERC
inquiries. Standard & Poor's does not expect the downgrade to
lead to any serious liquidity problems at AES.

The negative outlook reflects refinancing risk associated with
debt maturities at the parent of $300 million in 2002 and $1.8
billion in 2003, given heightened uncertainty in the bank
markets. AES has put forth a plan whereby it will utilize the
proceeds from asset sales, potential capital market issuances,
and excess operating cash flows to fund the debt maturities and
assist in refinancing the credit facility. The maturities include
an $850 million revolving credit facility, approximately $775
million of other bank debt, and $500 million in senior unsecured
notes. Once the revolver is renewed, the rating will likely
stabilize. Upon execution of AES' short-term plan, there is a
possibility that the ratings will return to their previous
levels. We understand that AES is currently in discussions with
the banks regarding the refinancing of its revolver. AES has also
publicly stated its intention to pay down additional debt over
the longer term (two to four years) and stabilize its revenue
base, which would further improve credit quality.

AES CORP: Defends Liquidity in Response to S&P Downgrade
In an official company statement, The AES Corporation responded
Thursday to Standard & Poor's announcement that it has lowered
its corporate credit and senior unsecured debt ratings on AES.

"While we are disappointed with today's [Thursday's] action, we
are pleased that S&P has noted the significant improvement in our
liquidity position since the beginning of the year and also
acknowledged the fact that we are not in the trading business and
consequently have no trading liabilities and no issues arising
from the recent FERC inquiries," said Barry Sharp, Chief
Financial Officer.

"Our current parent liquidity is over $450 million, and the cash
and cash equivalents at our subsidiaries is approximately $1.2
billion. As S&P notes AES's liquidity is not seriously affected,
and the associated triggers with this downgrade amount to less
than $60 million of Letters of Credit. These Letters of Credit
are primarily to cover payments for construction projects that
were already included in our forecast. We expect to generate
$1.25 billion of parent operating cash flow in 2002. We have
reduced our discretionary capital expenditures by $500 million,
and have planned reductions in operating costs of $200 million.
In addition, asset sales and financings already announced will
add an additional $800 million. In short, we are continuing to
achieve the commitments that we made to our investors," Mr. Sharp

AES is a leading global power company comprised of competitive
generation, distribution and retail supply businesses in
Argentina, Australia, Bangladesh, Brazil, Cameroon, Canada,
Chile, China, Colombia, Czech Republic, Dominican Republic, El
Salvador, Georgia, Germany, Hungary, India, Italy, Kazakhstan,
the Netherlands, Nigeria, Mexico, Oman, Pakistan, Panama, Qatar,
South Africa, Sri Lanka, Tanzania, Uganda, Ukraine, the United
Kingdom, the United States and Venezuela.

The company's generating assets include interests in 177
facilities totaling over 59 gigawatts of capacity. AES's
electricity distribution network has over 727,000 km of conductor
and associated rights of way and sells over 108,000 gigawatt
hours per year to over 16 million end-use customers.

AES is dedicated to providing electricity worldwide in a socially
responsible way.

For more general information visit our web site at or
contact investor relations at

CONTACT:          AES
                  Kenneth R. Woodcock, 703/522-1315


MERCANTILE INTERNATIONAL: Shareholders Approve Restructuring
Mercantile International Petroleum Inc., an oil and gas
exploration and production company, reported Thursday that the
previously announced restructuring of its outstanding U.S. $40
million 11.5% senior unsecured debentures due May 11, 2002 was
approved by its shareholders, warrantholders and debentureholders
on June 3, 2002. The restructuring is pursuant to a Plan of
Arrangement under the Companies Law of the Cayman Islands and the
Plan was today sanctioned by an order of the Grand Court of the
Cayman Islands. MIP is now completing the documentation required
to implement the Plan and expects that process to be completed
and the Plan implemented by June 30, 2002.

About MIP - MIP is incorporated in the Cayman Islands and is
involved in oil and gas exploration, development and production.
Through its wholly-owned subsidiaries MIP holds oil and gas
interests in Peru and Colombia. MIP's financial statements are
available on SEDAR.

          c/o Maricorp Services Ltd.,
          4th Floor, West Wind Building, 70 Harbour Drive,
          George Town, Grand Cayman
          Phone: 1-345-949-2141
          Contact Rudolph Berends, CEO

PAZ DEL RIO: Future Lies In New Government's Hands
Colombia's Acerias Paz del Rio is pinning its hopes on the new
government to be led by Alvaro Uribe, reports Business News
Americas. The steel producer's future prospects for survival will
hinge largely on what happens in the next six months.

"There are high hopes with the [May 26] election of the new
President, because during the campaign he said he would, in one
way or another, help out," said Gilberto Gomez, the Company's
provisional liquidator.

The new government will take office August 6, Gomez said.

Paz del Rio has been swimming in the red ink before it posted a
profit of COP483 million in the first quarter of the year. The
positive earnings were attributed to the improvements in
efficiency and an increase in the price of metals, as well as the
devaluation of the Colombian peso currency in the final months of

Meanwhile, according to Gomez, Japan's Kobe Steel, which is
interested in applying its technology at Paz del Rio's
facilities, has produced a report for the Japanese government
laying out recommendations for the plant's conversion to new
technology. The report, produced after Kobe officials made three
visits to Paz del Rio, also outlines measures to reduce
atmospheric emissions by cutting fuel consumption. The final
draft of the report is due to be delivered this month.

Discussions on a strategic partnership between the two companies
are on hold, which Gomez said was normal given the change of

          Carrera 8 # 13-31, Pisos 7 al 11
          Bogota, D.C.
          Phone: (091) 282-8111
          Fax: (091) 282-6268 282-3480

TELECOM: To Pay Nortel COP149.8 Billion In Damages
Colombia's state-run Telecom received more bad news Thursday
after the country's highest appellate court ordered it to pay
Canada's Nortel Networks Corp. COP149.8 billion (US$64 million)
in compensation for lower-than-expected revenues from a joint-
venture contract.

According to a report by Reuters, the compensation is COP1
billion, or US$429,000, below the amount awarded to Nortel in a
lower court ruling last year.

"There was a modification in the amount of the fine ... due to a
lag in the exchange rate used," Magistrate Ricardo Hoyos said.

Telecom could still request a technical review of the decision,
to determine whether evidence was properly gauged.

Telecom's legal balking had been a thorn in diplomatic relations
between Colombia and the United States, where Canada's Nortel has
major operations. U.S. Trade Representative Robert Zoellick
warned in March that Telecom's failure to pay Nortel had held up
key legislation granting trade preferences to Colombia.

          Calle 23 No 13-49, Bogot
          Phone: 286-0077
          Home Page:

TELECOM: Continued Strike May Lead To Liquidation
Telecom faces a threat of dissolution if a workers' strike
continues. The labor action has cost the cash-strapped Colombian
firm more than US$6 million in the past 12 days.

However, according to Communications Minister Angela Montoya, the
possibility of liquidating the Company was not a threat, but an
imminent reality, as the firm's financial viability was growing
more doubtful by the day.

In December 2001, the government agreed to guarantee a US$600
million loan for Telecom and authorized another temporary US$250
million loan from public funds, both contingent on a commitment
from the Company to reduce costs and undertake a restructuring.

But Telecom's losses are expected to widen this year to US$300
million from US$36 million in 2001. On top of declining revenues
and increasing costs, Telecom has been hurt by the cancellation
of 17 joint venture agreements with multinationals, including
Alcatel, Itochu, Ericsson, Nortel, Siemens and NEC.

Meanwhile, negotiations between the Company and striking workers
have been suspended because management refuses to discuss
employees' demands until they end the job action.

TERRA COLOMBIA: Exec. Denies Rumors Of Financial Trouble
An executive of Terra Colombia, a subsidiary of Spain-based ISP
and content provider Terra Lycos, dismissed rumors that the
Company is struggling financially, reports Business News

Terra Colombia CEO Alvaro Bermudez shunned the reports, saying
that the Company expects to generate revenues of US$2.5 million
this year. He based his projections on the Company's performance
in four business areas: advertising (40% of total billing),
corporate ASP services (40%), e-commerce (12%) and chargeable
content (8%).

Terra Colombia is in a very good position because local
competitors US-based Starmedia and Brazilian ISP UOL are not
doing well, Bermudez claimed. UOL plans to exit Colombia and has
received four offers for its subscriber base of 8,500 clients.

          Corporate Headquarters and
          Office of the Executive Chairman:
          Terra Lycos
          Calle Nicaragua, 54
          Barcelona, Spain
          Tel: 34-91452-3000

          Operating Headquarters:
          Terra Lycos
          400-2 Totten Pond Road
          Waltham, MA. 02451 U.S.A.
          Tel: 781-370-2700
          Fax: 781-370-2600
          Home Page:
          Jose Carlos Duran, Director of Investor Relations
          Tel: 34-91-4523274

          Carrera 13, Numero 93-68
          Oficina 302
          Bogota, Colombia

          Home Page:

E L   S A L V A D O R

AES CORP: Subsidiaries Feel The Sting of S&P's Parent Downgrade
Standard & Poor's took ratings action on five subsidiaries of The
AES Corp. due to their rating linkage to AES. The ratings actions
are directly attributable to the downgrade of AES' ratings. There
have been no other events that in and of themselves would have
caused a rating action on these subsidiaries.

Standard & Poor's lowered AES' subsidiary IPALCO Enterprises
Inc.'s corporate credit rating to triple-'B'-minus from triple-
'B', and senior unsecured debt rating to double-'B'-plus from
triple-'B'-minus; IPALCO's subsidiary Indianapolis Power & Light
Co.'s (IPL) corporate credit rating and senior secured debt to
triple-'B'-minus from triple-'B', senior unsecured debt to
double-'B'-plus from triple-'B'-minus, and preferred stock to
double-'B' from double-'B'-plus. All ratings have been removed
from CreditWatch with negative implications. The outlook is
negative. IPALCO's and IPL's 'A-2' commercial paper ratings have
been withdrawn at the issuers' request.

At the same time, Standard & Poor's also changed the outlook for
debt issues at four other AES subsidiaries: AES Eastern Energy
L.P., AES Red Oak LLC, AES Ironwood LLC, and the $120 million
bank loan secured by Compania de Alumbrado Electrico de San
Salvador, S.A. de C.V.; Empresa Electrica de Oriente S.A. de
C.V.; and Distribuidora Electrica de Usulutan S.A. de C.V. from
stable to negative and left their ratings unchanged at triple-

The ratings on CILCORP Inc., the direct parent of Central
Illinois Light Co., remain on CreditWatch with positive
implications pending CILCORP's and Central Illinois Light's sale
by AES to Ameren Corp.

In most circumstances Standard & Poor's will not rate the debt of
a wholly owned subsidiary higher than the rating of the parent.
Exceptions can be made, and were in these cases, on the basis of
the cumulative value provided by enhancements such as structural
protections, covenants, a pledge of stock, and an independent
director, assuming the stand-alone credit quality of the entity
supports such elevation. These provisions serve to make these
subsidiaries bankruptcy remote from a sponsor with weaker credit
quality. Standard & Poor's views these provisions as supportive
in that they reduce the risk of a subsidiary being filed into
bankruptcy in the event of a parent bankruptcy, but does not view
them as 100% preventative of such a scenario. Therefore, Standard
& Poor's limits the rating differential provided by such
structural enhancements to three notches. On that basis,
subsidiaries' corporate credit ratings cannot be higher than
triple-'B'-minus, and those that are rated triple-'B'-minus would
have a negative outlook, reflecting the negative outlook of AES

          Calle El Bambu, Col. San Antonio
          San Salvador
          El Salvador
          Phone: 503-206-9011
          Fax: 503-232-5012

          Final 8a. Calle Poniente, Calle a Ciudad Pacifico
          Plantel Jalacatal
          San Miguel
          El Salvador
          Phone: 503-660-8027
          Fax: 503-660-8023


AHMSA: Announces Exemption From U.S. Tariff
Mexican steelmaker Altos Hornos de Mexico SA (AHMSA) announced
that the U.S. Court of International Trade has removed all
tariffs on its exports of steel plate, relates Dow Jones

As a result, AHMSA will now be allowed to compete under the same
conditions as U.S. steel producers. The ruling puts an end to an
antidumping probe that began 10 years ago and slapped a 49.25%
duty on its plates.

AHMSA, which has been mired with problems following a drop in
world steel prices resulting from the 1998 Asian crisis, is
scheduled to present to creditors on June 30 a new restructuring
plan involving some US$1.85 billion in bank debts.

AHMSA has suspended debt payments since 1999, and for three
years has been in negotiations with lenders regarding debt

          Prolongacion B. Juarez s/n,
          Monclova , Coahuila 25770

          Phone: +52 86 33 81 72
          Fax: +52 86 33 65 66
          Alonso Ancira Elizondo, CEO, Vice Chairman, Pres./CEO
          Jorge Ancira Elizondo, Chief Financial Officer
          Manuel Ancira Elizondo, Chief Operating Officer

GRUPO MEXICO: Threatens To Close Plants On Union's Inflexibility
A threat of closure on two of Grupo Mexico plants still hovers.
According to a report by the Financial Times, the world's third-
largest copper producer is still considering shutting down the
plants if unions persisted in their intention to strike over a
demand for a 16.3% pay increase.

Union members at two of its plants, in the northern Mexican
states of Sonora and Coahuila, called a strike on Monday,
protesting that their contracts had been violated. Grupo Mexico
responded by saying the rises demanded by union members would
make the plants unprofitable, given low metals prices. It said
the plants would remain closed until such time as market
conditions permitted their reopening.

The Company tried to demonstrate that its threat was credible by
pointing out that it wanted to reduce global copper production.
It said closing the Cananea plant at Sonora plant alone would
reduce production by about 150,000 tonnes per year.

Grupo Mexico has been struggling to cope with the drop in world
copper prices, which fell 11.8% in the year to March. The impact
on its finances has forced the company into renegotiating its
debt with creditors. Grupo Mexico says it has made "positive
advances" in its debt negotiations with creditors, who had
offered to put forward about US$105 million in new free capital.

           Avenida Baja California 200,
           Colonia Roma Sur
           06760 Mexico, D.F.
           Phone: +52-55-5264-7775
           Fax: +52-55-5264-7769
           German Larrea Mota-Velasco, Chairman & CEO
           Xavier Garcia de Quevedo Topete, President & COO

GRUPO TFM: Finds Adequate Interest In $180M 10-Yr Bonds
Grupo Transportacion Ferroviaria Mexicana SA de CV (TFM),
successfully priced US$180 million of 10-year bonds Thursday, an
indication that investors are beginning to show enough interest
in a company rated B2 by Moody's Investors Service.

Dow Jones Newswires, citing investors involved in the deal,
reports that lead manager Salomon Smith Barney received around
four times more orders for the offering than needed.

The new debt priced at 12.75% yield.

Around 60% of the investors involved in the deal were high-yield
and crossover buyers, while the rest were mainly dedicated
emerging markets investors. Crossover buyers typically pay higher
rates for emerging markets credits.

For many months, TFM had considered selling the bonds as a way to
buy back a stake in its own shares held by the Mexican

As of March 31, 2002, TFM's cash balances stood at US$76.7
million and debt at US$880.1 million. Refinancing needs over the
next 12 months include US$295 million in commercial paper
maturing in September 2002, which are expected to be rolled over.
Long-term debt includes US$150 million senior notes due 2007 and
US$443.5 million senior discount debentures due 2009.

Grupo TMM, the largest Latin American multi-modal transportation
and logistics company, is the owner of the controlling interest
in TFM.

          Jacinto Marina, 011-525-629-8790

          Brad Skinner, 011-525-629-8725 (Investor Relations)

          Luis Calvillo, 011-525-629-8758 (Media Relations)

          (general investors, analysts and media)
          Kristine Walczak, 312/726-3600


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter Latin American is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ,
and Beard Group, Inc., Washington, DC. John D. Resnick, Edem
Psamathe P. Alfeche and Ma. Cristina Canson, Editors.

Copyright 2002.  All rights reserved.  ISSN 1529-2746.

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
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Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.

The TCR Latin America subscription rate is $575 per half-year,
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